CAS Exam 6C Fall 2019, Question 15
Study guide: Exam 6C
The following information is available for a federally regulated property and casualty insurance company as at December 31, 2018. All amounts are in thousands of dollars ($000s).
| Item | Value |
|---|---|
| Discount rate | 3.0% |
| MfAD for claims development | 10.0% |
| MfAD for recovery from reinsurance ceded | 1.0% |
| MfAD for investment return rates | 0.5% |
| Future income tax rate | 36.0% |
| Unpaid claims and adjustment expenses from P&C Annual Return page 20.20 | 120,000 |
The cumulative accident year payment pattern is as follows:
| Age (Months) | % Cumulative Paid |
|---|---|
| 12 | 50% |
| 24 | 80% |
| 36 | 100% |
The company began writing policies in January 2018 and purchased a 30% quota share reinsurance policy. The amounts reported in the financial statements are equal to the actuarial present values calculated by the actuary.
Part a (1 point)
Calculate the undiscounted net unpaid claims.
Part b (0.75 points)
Calculate the actuarial present value of unpaid claims ceded to reinsurers.
Part c (0.25 points)
Define the asset for future income taxes.
Part d (0.75 points)
Calculate the estimated effect of discounting the asset for future income taxes.
No current syllabus covers this question; it is kept for the record.
Answer this question and see the worked solution
Concepts tested
- Margin for Adverse Deviations
- Future Income Tax Asset
- Loss Reserve Discounting
- Quota Share
- Unpaid Claims